Correlation Between Reliance Steel and Caltagirone SpA

Can any of the company-specific risk be diversified away by investing in both Reliance Steel and Caltagirone SpA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Reliance Steel and Caltagirone SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Reliance Steel Aluminum and Caltagirone SpA, you can compare the effects of market volatilities on Reliance Steel and Caltagirone SpA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Reliance Steel with a short position of Caltagirone SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Steel and Caltagirone SpA.

Diversification Opportunities for Reliance Steel and Caltagirone SpA

0.11

Correlation Coefficient

Reliance Steel  Caltagirone SpA

Average diversification

The 3 months correlation between Reliance and Caltagirone is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Steel Aluminum and Caltagirone SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caltagirone SpA and Reliance Steel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Reliance Steel Aluminum are associated (or correlated) with Caltagirone SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caltagirone SpA has no effect on the direction of Reliance Steel i.e., Reliance Steel and Caltagirone SpA go up and down completely randomly.

Pair Corralation between Reliance Steel and Caltagirone SpA

Assuming the 90 days horizon Reliance Steel Aluminum is expected to under-perform the Caltagirone SpA. But the stock apears to be less risky and, when comparing its historical volatility, Reliance Steel Aluminum is 1.67 times less risky than Caltagirone SpA. The stock trades about 0.0 of its potential returns per unit of risk. The Caltagirone SpA is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  608.00  in Caltagirone SpA on December 26, 2024 and sell it today you would earn a total of  100.00  from holding Caltagirone SpA or generate 16.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Reliance Steel Aluminum  vs.  Caltagirone SpA

Reliance Steel Aluminum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reliance Steel Aluminum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reliance Steel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Caltagirone SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Caltagirone SpA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Caltagirone SpA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Reliance Steel and Caltagirone SpA

The main advantage of trading using opposite Reliance Steel and Caltagirone SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Steel position performs unexpectedly, Caltagirone SpA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Caltagirone SpA will offset losses from the drop in Caltagirone SpA's long position.

The idea behind Reliance Steel Aluminum and Caltagirone SpA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.